International Monetary Fund praises Algeria's diversification, warns on finances

The International Monetary Fund (IMF) praised Algeria's progress in diversifying its economy away from hydrocarbons (oil and gas), but warned about its public finances.

The report said Algeria had made progress towards a more varied economy, using its natural resources, investments, reforms and links with African and European markets.

The report said a continuing budget deficit and financing pressures could make the wider investment programme harder to deliver and less sustainable over the long term.

The IMF urged Algeria to bring public finances under control gradually to ease these pressures. It said this should be supported by better spending efficiency and more revenue from outside oil and gas.

The report said that if these steps were taken carefully, they could protect priority investments and vulnerable groups.

Oil and gas prices are volatile, the report said, which affects government income. It recommended building up reserves and saving extra income from high prices, so that public investment can continue when prices fall.

The report also said higher oil income now offers a chance to rebuild financial reserves.

The IMF said the challenge now is to turn investments and reforms into lasting gains in jobs, productivity and exports. It said this needs a more dynamic private sector and an economy better able to absorb shocks.